5 key principles to get UK cashflow lenders to say "Yes" to funding your deal.

1. Principles to
get lenders to
say
5YES
to finance your
acquisition or
MBO

2. Be a good fit
Lenders have different criteria
to describe their deal appetite:
Sector, deal type, minimum
revenue, EBITDA & loan
amount, client profile, team
experience & business model.
There is limited lender choice
for deals <£1m EBITDA or <£2m
loan amount. Make sure your
deal fits their criteria.
1

3. Reduce risk
Consistency>variability
Growth>decline
Healthy gross margins
Client spread, contract
terms & concentration
Affordable deal structure
Strong finance function
The lender credit process will
highlight and test risk areas.
Minimise your risk profile and
model forecast scenarios.
2

4. Shared risk
A typical funding structure is
buyer equity + lender debt +
surplus cash + vendor
deferred = consideration.
Lenders will not finance the
entire structure and require a
cash contribution from the
buying team.
Plan to contribute 25% to 50%
of the completion amount.
3

5. Sensible leverage
Cashflow lending range is
typically 1x to 2.5x most
recently achieved EBITDA. The
lender will factor in working
capital changes, capex & tax
and apply their debt service
coverage ratio to determine
the loan amount offered.
Plan for lower leverage and be
pleasantly surprised if offered
more.
4

6. Be affordable
Operating cashflow services
monthly loan payments and
vendor deferred amounts.
Lenders require a cashflow
forecast and will stress test it
to validate loan affordability.
This may result in a lower
quantum, changes to deferred
terms or additional equity.
Check your offer is affordable
before signing the HoT.
5

7. Blueray Capital
There are lots of moving parts to
successfully complete an acquisition.
We've outlined here some of the key
issues relating to funding a deal.
To find out more, download our
Acquisition Finance Guide.
Contact Blueray Capital to start a
discussion about funding possibilities
for your next acquisition.